Alstom’s Financial Troubles Deepen, Raising Concerns of Cash Call
Alstom, the French train group, is facing mounting problems as its financial situation continues to deteriorate. Following last month’s cash flow warning, which led to a 35% drop in shares, Alstom’s CEO, Henri Poupart-Lafarge, stated that a capital increase was not being considered to address the balance sheet issues. However, in a recent announcement, Poupart-Lafarge admitted that the company’s plans to reduce debt through asset disposals may not be enough to avoid a cash call, causing shares to decline by an additional 20%.
Alstom is grappling with several challenges, including an increase in inventory, project delays, and a slowdown in orders. Despite these ongoing issues, the company is under pressure to reduce its net debt, which has surged by 50%, reaching 3.4 billion euros since March. In order to maintain its investment grade credit rating, Alstom must make significant cuts to its debt. While the company had initially proposed an asset disposal plan worth up to 1 billion euros, investors have realized that this would only achieve half of the targeted reduction in leverage by March 2025. Additionally, Alstom has suggested that there will be no dividend payout in the current fiscal year.
Recognizing the urgency of the situation, Alstom’s major shareholders, including Caisse de dépôt et placement du Québec and French public investment bank Bpifrance, have called for Poupart-Lafarge to step down from his dual chairman role. The shareholders believe that a change in leadership is necessary to address the company’s challenges effectively. However, they also acknowledge that constant shifts in the company’s message, as seen in Denmark’s Orsted, can be unsettling for investors. Operational upheaval combined with inconsistent communication is a recipe for further investor dissatisfaction.
Alstom’s woes highlight the need for the company to take decisive action to address its financial difficulties and instill confidence among stakeholders. As the situation unfolds, investors and industry observers will be closely monitoring Alstom’s next steps in its efforts to navigate these challenging times.
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More detail via Reuters here… ( Image via Reuters )
